Just a quick note for ultra-high net worth investors doing year-end tax planning.
The market is up 4.7 percent from its recent low on November 23rd. In pre-market trading, the S&P 500 looks likely to open up another 1.5 percent today. If you have unfulfilled charitable commitments for 2018, today would be a good day to fund them.
As I’ve written about in my Tax Alpha blog post, a smart way to rebalance portfolios is to make charitable donations of appreciated assets. This has the effect of reducing your exposure to the asset that has outperformed while avoiding the tax consequences of an outright sale.
Generally, gifts of stocks and other exchange-traded assets are valued at the end-of-day closing price on the day of the transfer. If today’s pre-market gains hold, most equities will have rallied about six percent from the recent lows.
As I discussed in this Risk Manager’s Video, I believe investment risks are much greater to the downside, especially for equities. If this is correct, the recent move up in stocks is likely to be a bear-market rally and should be sold.
A charitable transfer of stock is a way sell into the rally without adverse tax consequences, as well as generating a tax deduction.